DOE Loves Solar, Offers $150M Loan Guarantee To 1366 Technologies

Solar has emerged to be the government’s favorite source of renewable energy. The U.S. Department of Energy announced loan guarantees for four solar projects earlier this week and on Friday named 1366 Technologies as the fifth winner.

A Massachusetts company has received a $150 million loan guarantee offer to mass produce silicon wafers. The startup has figured out a way to make cheaper silicon wafers by consolidating the manufacturing steps that not only save time but also reduce the amount of silicon material that goes to waste, the company said.

1366 plans to use the loan guarantee to finance the production of 700 to 1,000 megawatts of silicon wafers each year, the DOE said. The company’s own press release said it will build a 20-megawatt factory in Massachusetts first, and the factory will be completed in 2013. It will then build an 1,000-megawatt manufacturing center starting in 2013, and it hasn’t decided on the location.

With the loan guarantee, the company will finally be able to commercialize the wafer technology. 1366, founded in 2007, initially set out to make silicon solar cells by using a process that enables the cells to trap more light and improve their sunlight-to-electricity efficiencies. The company is still marketing that technology. But its wafer technology has attracted more federal dollars, including $4 million from a DOE program last year that funds early-stage technology development.

The loan guarantee program will be remembered for jump-starting a boom in renewable energy development in the country. Created by the American Recovery and Reinvestment Act in 2009, the program funds renewable energy projects, from solar and geothermal power plants to transmission lines (that will be used to transport renewable electricity). The main goal is to create jobs through promoting clean energy generation.

The program, called Section 1705, mostly supports newer technologies and large-scale projects that can’t easily attract private financing. Investors typically shy away from financing technologies that are too new to have been proven in the field. In many cases, the government not only guarantees to pay back loans if borrowers can’t, it also provides the loans through the Federal Financing Bank. 1366 will get the loan from the bank.

So far, the program has offered about $14.61 billion loan guarantees to 27 projects.

The loan guarantee to 1366 shows once again that solar technology and power plant developers are the biggest beneficiaries of the program. Solar offers some advantages that other sources of renewable electricity don’t have. Solar electric systems can go on rooftops or rise from the ground in remote areas. Wind turbine installations don’t have that kind of flexibility and tend to be large projects, which then require sizable land. Geothermal faces both geographic and geological limitations.

Earlier this week, the DOE announced it was offering a $250 million loan guarantee to Calisolar to build a solar silicon factory in Ohio. It also disclosed loan guarantees for three solar power plants: $359.1 million to Sempra Generation for a 150-megawatt project in Arizona, $1.2 billion to Abengoa Solar for a 250-megawatt power plant in California, and $681.6 million to NextEra Energy Resources for a 250-megawatt project in California.

Earlier this month, the government said it was providing a $45.6 million loan guarantee to Fotowatio Renewable Ventures to build a 20-megawatt solar farm in Nevada. Adding the 10 other solar loan guarantees listed on the DOE’s website, the government has offered about $12 billion to 16 solar projects overall. About $10.42 billion of that total have been offered to 11 power plant proposals, and the remaining $1.56 billion for 5 factory projects.

The program is set to end on Sept. 30 this year. The chances of prolonging its life are slim given that lawmakers are keen on cutting spending. The Solar Energy Industries Association (SEIA) is lobbying instead to get as much funding as possible for another loan guarantee program called Section 1703 for the next fiscal year. Section 1703 will likely to be more palatable to Republicans because it came into being in 2005, when Republicans controlled the Congress and the White House.

Some of the financial terms in Section 1703 aren’t as generous as those in Section 1705. Section 1703 also is opened not only to renewable energy projects but also to nuclear and coal. Only four projects have received loan guarantee commitments through this program. SEIA wants to see some of the benefits of the Section 1705 program being added to Section 1703.

What the solar trade group also supports is the creation of a “clean energy bank,” an idea championed by Sen. Jeff Bingaman to create a more permanent authority to finance renewable energy projects.

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